Retail Sales Probably Fell as Sandy Kept U.S. Consumers Home

A woman looks at receipts while carrying an Aldo Group Inc. shopping bag and descending stairs at the Fair Oaks Mall in Fairfax, Virginia, on Monday, Nov. 12. 2012. Photographer: Andrew Harrer/Bloomberg

Nov. 14 (Bloomberg) -- Retail sales in the U.S. probably
fell in October for the first time in four months as superstorm
Sandy kept consumers in the Northeast away from auto dealers and
shopping centers, economists said before a report today.

The projected 0.2 percent drop in purchases would follow a
1.1 percent gain in September, according to the median forecast
of 83 economists surveyed by Bloomberg. Another report may show
prices paid by producers grew more slowly in October.

Companies like General Motors Co. and Ford Motor Co. have
said last month’s sales slump will probably prove temporary as
brighter job prospects, rising home prices and sturdier finances
boost household confidence heading into the year-end holiday
shopping season. Sustained gains in consumer spending, which
accounts for about 70 percent of the economy, would help counter
a slowdown in business investment.

“The consumer remains engaged,” said Russell Price, a
senior economist at Ameriprise Financial Inc. in Detroit. “As
long as consumers are feeling better about their home price and
the job market keeps improving, it’s going to drive confidence
higher. That’s translating into gains in retail sales.”

The Commerce Department will release the figures at 8:30
a.m. in Washington. Economists’ estimates ranged from a decline
of 1.2 percent to a gain of 0.6 percent.

October’s projected slowdown comes after September and
August marked the best back-to-back retail sales showing since
late 2010. Part of the jump in purchases during that period was
the result of households snapping up Apple Inc.’s new iPhone 5.
Support also came from car and light truck sales, which climbed
in September to a 14.9 million pace, the fastest in more than
four years, according to figures from Ward’s Automotive Group.

Auto Sales

Those gains probably weren’t repeated in October, when
Sandy, history’s biggest Atlantic storm, prevented potential
shoppers from getting to stores. Auto demand dropped to a 14.2
million pace in October after the tempest slammed into the East
Coast during the auto industry’s busiest time of the month.
Carmakers have said those sales should be made up by the end of
the year.

The storm also didn’t affect all retailers the same way.
Stockpiling before Sandy struck likely boosted sales at grocery,
drug and home-improvement stores, just as it hurt demand at
department stores and merchants in malls, according to
economists at Morgan Stanley in New York.

Some stores reported a pickup in October demand even with
the adverse weather. Same-store sales at Macy’s Inc., the
second-biggest U.S. department-store chain, rose 4.1 percent,
topping the 4 percent average estimate of analysts surveyed by
Retail Metrics Inc. Kohl’s Corp.’s same-store sales climbed 3.3
percent, beating estimates for a 0.8 percent gain.

Retail Shares

The Consumer Discretionary Select Sector SPDR Fund, which
includes companies like Tiffany & Co. and Best Buy Co., has
climbed about 16.8 percent this year, as spending has advanced.

Economists project the retail sales category used to
calculate gross domestic product, which excludes auto dealers,
building-material stores and service stations, will show a 0.3
percent gain in October following a 0.9 percent increase the
prior month.

As the holiday shopping seasons begins, Hasbro Inc.’s
retail customers are “looking forward to a good year,” David
Hargreaves, chief operating officer of the Pawtucket, Rhode
Island-based toymaker, said during a call with analysts on Oct.
22. “Certainly consumer demand has held up pretty well. I think
they’re sort of cautiously optimistic.”

Improving confidence could help keep sales on the rise. The
Thomson Reuters/University of Michigan consumer sentiment gauge
advanced to a five-year high in November. Rising house prices
are also shoring up wealth: The S&P/Case-Shiller index of home
values in 20 cities has risen from a year earlier for the past
three months, the longest positive stretch in two years.

Also today, an 8:30 a.m. report from the Labor Department
will show producer prices increased 0.2 percent in October after
a 1.1 percent gain the prior month that was propelled by fuel
prices, according to the survey median.